(By Senators Tomblin, Mr. President, and Sprouse, By Request of
the Executive)

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[Introduced March 10, 2005; referred to the Committee

on Pensions; and then to the Committee on Finance.]

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A BILL to amend and reenact §18-7A-34 of the Code of West Virginia,
1931, as amended, relating to discontinuing the loan program
participation of teachers and nonteachers who become members
of the Teachers Retirement System on or after the first day of
July, two thousand five.

Be it enacted by the Legislature of West Virginia:
That §18-7A-34 of the Code of West Virginia, 1931, as amended,
be amended and reenacted to read as follows:

ARTICLE 7A. STATE TEACHERS RETIREMENT SYSTEM.

§18-7A-34. Loans to members.(a) A member of the retirement system upon written application
may borrow from his or her individual account in the Teachers
Accumulation Fund, subject to these restrictions:
(1) Loans shall be made in multiples of ten dollars, the minimal loan being one hundred dollars and the maximum being eight
thousand dollars: Provided, That the maximum amount of any loan
when added to the outstanding balance of all other loans shall not
exceed the lesser of the following: (a) Fifty thousand dollars
reduced by the excess (if any) of the highest outstanding balance
of loans during the one-year period ending on the day before the
date on which the loan is made, over the outstanding balance of
loans to the member on the date on which the loan is made; or (b)
fifty percent of the member's contributions to his or her
individual account in the Teachers Accumulations Fund: Provided,
however, That if the total amount of loaned money outstanding
exceeds forty million dollars, the maximum shall not exceed three
thousand dollars until the Retirement Board determines that loans
outstanding have been reduced to an extent that additional loan
amounts are again authorized.
(2) Interest charged on the amount of the loan shall be six
percent per annum, or a higher rate as set by the Retirement Board:
Provided, That interest charged shall be commercially reasonable in
accordance with the provisions of Section 72(p)(2) of the Internal
Revenue Code, and the federal regulations issued thereunder. If
repayable in installments, the interest shall not exceed the annual
rate so established upon the principal amount of the loan, for the
entire period of the loan, and such charge shall be added to the
principal amount of the loan. The minimal interest charge shall be for six months.
(3) No member shall be eligible for more than one outstanding
loan at any time.
(4) If a refund is payable to the borrower or his or her
beneficiary before he or she repays the loan with interest, the
balance due with interest to date shall be deducted from such
refund.
(5) From his or her monthly salary as a teacher the member
shall pay the loan and interest by deductions which will pay the
loan and interest in substantially level payments in not more than
sixty nor less than six months. Upon notice of loan granted and
payment due, the employer shall be responsible for making such
salary deductions and reporting them to the Retirement Board. At
the option of the Retirement Board, loan deductions may be
collected as prescribed herein for the collection of members'
contribution, or may be collected through issuance of warrant by
employer. If the borrower decides to make loan payments while not
paid for service as a teacher, the Retirement Board must accept
such payments.
(6) The entire unpaid balance of any loan, and interest due
thereon, shall, at the option of the Retirement Board, become due
and payable without further notice or demand upon the occurrence
with respect to the borrowing member of any of the following events
of default: (A) Any payment of principal and accrued interest on a loan remains unpaid after the same becomes due and payable under
the terms of the loan or after such grace period as may be
established in the discretion of the Retirement Board; (B) the
borrowing member attempts to make an assignment for the benefit of
creditors of his or her refund or benefit under the retirement
system; or (C) any other event of default set forth in rules
promulgated by the Retirement Board in accordance with the
authority granted pursuant to section one, article ten-d, chapter
five of this code: Provided, That any refund or offset of an
unpaid loan balance shall be made only at the time the member is
entitled to receive a distribution under the retirement system.
(7) Loans shall be evidenced by such form of obligations and
shall be made upon such additional terms as to default, prepayment,
security, and otherwise as the Retirement Board may determine.
(8) Notwithstanding anything herein to the contrary, the loan
program authorized by this section shall comply with the provisions
of Section 72(p)(2) and Section 401 of the Internal Revenue Code,
and the federal regulations issued thereunder, and accordingly, the
Retirement Board is authorized to: (a) Apply and construe the
provisions of this section and administer the plan loan program in
such a manner as to comply with the provisions of Section 72(p)(2)
and Section 401 of the Internal Revenue Code and the federal
regulations issued thereunder; (b) adopt plan loan policies or
procedures consistent with these federal law provisions; and (c) take such actions as it deems necessary or appropriate to
administer the plan loan program created hereunder in accordance
with these federal law provisions. The Retirement Board is further
authorized in connection with the plan loan program to take any
actions that may at any time be required by the Internal Revenue
Service regarding compliance with the requirements of Section
72(p)(2) or Section 401 of the Internal Revenue Code, and the
federal regulations issued thereunder, notwithstanding any
provision in this article to the contrary.(b) Notwithstanding anything in this article to the contrary,
the loan program authorized by this section shall not be available
to any teacher or nonteacher who becomes a member of the Teachers
Retirement System on or after the first day of July, two thousand
five.

NOTE: The purpose of this bill is to prohibit teaching or
nonteaching members hired on or after July 1, 2005, from
participating in the loan program authorized by this section.

Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.